VISION AND INITIAL FEASIBILITY ANALYSIS OF A RECARBONISED FINNISH ENERGY SYSTEM

VISION AND INITIAL FEASIBILITY ANALYSIS OF A RECARBONISED FINNISH ENERGY SYSTEM Results for EnergyPLAN simulations of 2050 Finland Michael Child & Christian Breyer Lappeenranta University of Technology World Conference of Futures Research 2015: Futures Studies Tackling Wicked Problems 11 June 2015, Turku, Finland

Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 3

Primary aims: To examine the components of a fully-integrated (power, heating/cooling and mobility) fully-functional, reliable and recarbonized energy system for Finland in 2050 To determine the extent to which differing levels of nuclear power and forest-based biomass affect the cost of such an energy system To explore the roles of energy storage solutions in facilitating high shares of variable renewable energy generation, with a particular focus on Power-to-Gas (PtG), Powerto-Liquid (PtL) and energy storage technologies To develop more accurate future energy scenario modelling methodology in Finland that includes complete transparency of modelling assumptions To encourage discourse on energy-related issues that will contribute to the transformation of the Finnish energy system towards long-term sustainability 4

Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 5

EnergyPLAN Developed in 1999 at Aalborg University in Denmark Widely used and respected Energy system analysis carried out in hourly steps for one year Model includes analysis of electricity, heating and transport sectors Results form basis of technical regulation and market optimization strategies Main aim is to assist in the design of national energy planning strategies Model can also be applied on larger and smaller scales Free download from http://www.energyplan.eu/ 6

Introduction to scenarios 2012 Reference 2020 Reference 2050 Basic (Maximum 145 TWhth biomass) 100 % RE Low (1.6 GWe) Medium (2.8 GWe) New (4 GWe) (Maximum 113 TWhth biomass) 100 % RE Low (1.6 GWe) Medium (2.8 GWe) New (4 GWe) 2050 Reference Business As Usual (BAU) Test scenarios Target of essentially zero carbon emissions from energy sector Target of complete energy independence Finland as an island 7

Introduction to scenarios 8 Technology 2012 2020 Key insights: Getting the least cost mix of technologies is a manual balancing act using EnergyPLAN EnergyPLAN separates electrolysers for different end products in reality integrated Very high installed capacities of solar PV and wind turbines, but still well below theoretical potentials for Finland 2050 Basic 100% RE 2050 Basic Low 2050 Basic Medium Installed Capacity GWe 2050 Basic New 100% RE 2050 Low Low 2050 Low Medium New Wind onshore 0.175 1.6 30 23 18.1 13 36.5 31 26.5 23.5 3 Wind offshore 0 0.9 5 5 5 5 6 6 6 6 1.5 Solar PV 0.01 0.1 30 30 30 30 35 35 35 35 1 Hydro - Run of river 2.595 3.111 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 CHP - DH 3.49 3.5 9.4 8 7.5 7 9 8.3 7.8 5.8 4 Condensing 2.045 1.5 0 0 0 0 0 0 0 0 3 2.75 4.3 0 1.6 2.8 4 0 1.6 2.8 4 6 PtG - CH₄ 0 0 23.5 23.5 19.6 19.6 32.3 31.3 27.4 25.4 1.0 PtG - H₂ 0 0.142 0.57 0.57 0.57 0.57 0.57 0.57 0.57 0.57 0.57 2050 BAU

Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 9

Primary Energy (TWhth) Primary energy 450 400 350 300 250 200 150 100 50 Hydrogen Hydro Solar PV Wind offshore Wind onshore Natural Gas Oil Coal and Peat 0 2012 2020 2050 Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Key insights: Strong roles for renewables in test scenarios Domestic hydrogen becomes major element of TPED Medium New 2050 BAU 10

Electricity Production (TWhe/a) Electricity production 240 190 Condensing CHP-Industry 140 CHP-District Heating 90 Hydro - Run of river Solar PV 40 Wind onshore -10 2012 2020 2050 Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Medium New Key insights: Electricity has increased role in energy system due to its flexibility Electricity from wind and solar PV become backbone of system 2050 BAU Wind offshore Net import/export or curtailment 11

Electricity Consumption (TWhe/a) Electricity consumption 240 V2G losses 190 PtG (H₂) PtG (CH₄) 140 Transport 90 District cooling Individual heating 40 Heat pumps - CHP -10 2012 2020 2050 Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Medium New 2050 BAU Total consumption (households and industry) Key insights: Flexible demand Closer relation of end user consumption to total production in reference scenarios Large demand for electricity in PtG processes 12

Total annual costs (M /a) Total annual costs 30000 25000 * WACC 7% 15% BAU: + 3 b New : + 2 b 20000 Variable costs - other Variable costs - CO₂ 15000 10000 Variable costs - fuel Fixed operation costs Annualized investment costs 5000 13 0 2012 2020 2050 Basic 100% RE 2050 Basic Low Key insights: Stranded investments in nuclear/ coal power stations not accounted (higher WACC?*) Test scenarios have high level of investment Reference scenarios have high level of fuel and CO₂ costs (risk of high CO 2 price**) 2050 Basic Medium 2050 Basic New 100% RE Low Medium 2050 BAU New ** CO 2 price 75 150 /t BAU: + 1.9 b rather likely according to Luderer G. et al., Environ.Res.Lett., 8, 034033, 2013

14 Levelized cost of electricity For 2050 Basic Medium Scenario Units Wind - onshore * Includes 40% electrical efficiency + 50% thermal efficiency; ** final value is levelized cost of energy (incl. heat) Key insights: Despite higher LCOE, offshore wind distribution favourable to energy system and may lead to overall cost reduction in new simulations Low full load hours in thermal plants lead to high LCOE Wind - offshore Solar PV Solar PV - - ground rooftop mounted Hydropower - Run of the river CHP plants plants PtG Methane Capex /kwe 900 1800 300 400 3060 820 6500 870 Opex_fixed % of capex 4.51 % 4.55 % 2.00 % 1.00 % 4.00 % 3.66 % 3.50 % 3.30 % Opex-var /MWhe 0 0 0 0 0 2.7 0 0 Fuel /MWhe 0 0 0 0 0 27.288 5.4 40 Efficiency % - - - - - 90 %* 37 % 51 % Lifetime Years 30 30 40 40 50 25 40 30 Full load hours Hours 2816 4280 982 982 6123 1120 7963 2400 WACC % 7 % 7 % 7 % 7 % 7 % 7 % 7 % 7 % crf %year ¹ 8.06 % 8.06 % 7.50 % 7.50 % 7.25 % 8.58 % 7.50 % 8.06 % LCOE cents/kwhe 4.0 5.3 2.9 3.5 5.6 12.3** 10.4 11.9**

Carbon emissions Scenario parameter 2012 2020 2050 Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 2050 Low 100% RE Low 2050 2050 Low Low Medium New 2050 BAU CO₂ -equivalent emissions Mt Cost of CO₂ - equivalent emissions (MEUR) Renewables share of primary energy (%) 48.15 48.97 0.22 0.25 0.24 0.18 0.18 0.19 0.23 0.18 25.10 289 1224 16 18 18 14 14 14 17 13 1882 33 34 100 89 81 75 100 89 82 75 43 15 Key insight: Future aim should be virtually zero emissions from energy sector Denmark has goal of zero emissions from power sector by 2035 and zero emissions from all energy sectors by 2050 Small amounts shown in table from non-biogenic component of waste

Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 16

Interpretation of results A 100% renewable energy system seems possible for Finland, given the assumptions made in this study The 100% RE scenarios are highly cost competitive High level of energy independence seems achievable Prominent roles of renewable energy and energy storage solutions should be considered in all future modelling Opportunities exist for increased domestic investment and RE-based employment Flexibility should be a defining feature of future energy systems 100% RE should be an equal partner in all future discourse regarding the Finnish energy system Further study is needed related to how people will choose to live, how they will perceive risk and the role of energy in their lives (Futures Research) in order to hone the technical requirements of the energy system used in modelling 17

Agenda Introduction to study Methods Main results Interpretation of results Questions and discussion 18

Questions or comments? 19

Thank you NEO-CARBON Energy project is one of the Tekes strategy research openings and the project is carried out in cooperation with Technical Research Centre of Finland VTT Ltd, Lappeenranta University of Technology (LUT) and University of Turku, Finland Futures Research Centre.

FURTHER INFORMATION

The uniqueness of our work Only research to consider 100% RE scenarios for Finland Only research to seek a virtually carbon-free energy system by 2050 Full integration of power, heating/cooling and mobility sectors Greatly expanded roles for wind and solar energy First study to explore large-scale energy storage solutions and Power-to-Gas (PtG) System modelled on an hourly resolution using historical data for a calendar year Full transparency of technical and economic assumptions Results suggest that a 100% RE scenario is a highly competitive cost solution compared to other test scenarios with increasing shares of nuclear power and a Business As Usual (BAU) scenario 22

Inputs + Strategy = Outputs Developed in 1999 at Aalborg University in Denmark Widely used and respected Energy system analysis carried out in hourly steps for one year Model includes analysis of electricity, heating and transport sectors Results form basis of technical regulation and market optimization strategies Main aim is to assist in the design of national energy planning strategies Model can also be applied on larger and smaller scales Free download from http://www.energyplan.eu/ 23

Flows of energy - 2012 24

Flows of energy Basic 100% RE scenario 25

Flows of energy Low 100% RE scenario 26

Flows of energy BAU scenario 27

18000 Breakdown of annualised investment costs 16000 14000 12000 10000 8000 6000 4000 2000 0 2012 2020 2050 Basic 100% 2050 Basic Low RE 2050 Basic 2050 Basic New Medium 100% RE Low Medium New 2050 BAU 28 Large CHP units Large Power Plants Wind Wind offshore Photovoltaic River of hydro BioJPPlant CO2Hydrogenation Chemical Sythesis Electricity grid District heating grid District heating substations EV batteries EV charging station Individual oil boilers Individual NG boilers Individual biomass boilers Inidividual heat pumps Individual electric heat Gas grid Other

Introduction to scenarios Category 2012 2020 2050 Basic 100% RE 2050 Basic Low 2050 Basic Medium Full load hours 2050 Basic New 100% RE 2050 Low Low Medium New 2050 BAU Wind onshore 2800 2819 2816 2816 2816 2816 2816 2816 2816 2816 2817 Wind offshore - 4278 4280 4280 4280 4280 4280 4280 4280 4280 4280 Solar PV 1000 1000 982 982 982 982 981 981 981 981 980 Hydro - Run of river 6424 6403 6123 6123 6123 6123 6123 6123 6123 6123 6123 CHP - District Heating 4106 3726 1591 1536 1120 797 542 545 568 590 3275 Condensing 2900 6027 - - - - - - - - 6080 8025 7749-7963 7964 7963-7963 7964 7963 7963 PtG (CH₄) - - 2583 2083 2400 2000 2121 2188 2500 2000 6000 PtG (H₂) - 3521 3509 3509 3509 3509 3509 3509 3509 3509 3509 Key insight: Low full load hours for thermal plants and PtG are problematic in some scenarios Synthetic gas production may also be needed for non-energy purposes 29

Introduction to scenarios Cost of bioenergy is dependent on the form Waste is assumed to be free Agricultural residues have little market value currently and will likely remain half the price of energy wood Estimated biomass price is 22 /MWh in 2050 (plus 5-11 /MWh handling) Stumpage price currently 2 /MWh Price to customer currently 9-23 /MWh* Stricter sustainability criteria could raise this to about 50 /MWh* Energy wood price highly unlikely to exceed 50 /MWh in 2050 Likely to be convergence between the price of energy wood and the price of pulpwood (stumpage price currently about 12 /MWh) *Sikkema et al. Mobilization of biomass for energy from boreal forests in Finland & Russia under present sustainable forest management certification and new sustainability requirements for solid biofuels. and Bioenergy 71 (2014) 23-26 30

Introduction to scenarios 1 Mm³ = 2 TWh = 7.2 PJ 2012 (TWhth) 2050 (TWhth) for heat and power 36 68 for small-scale housing 18 18 Industrial liquors for energy generation Agricultural residues for energy generation 38 38 n.a. 21 Total biomass 92 145 2050 assumptions based on 88 Mm³ annual harvesting i.e., less than current annual increment Low biomass scenarios developed which utilize less than current amount of forest biomass 31

Fuel use - Industry (TWhth) Fuel use - Industry 140 Key insights: Some shift from manufacturing to services Increased efficiency in industrial processes Industrial demand may be most rigid Opportunities also for Power-to-Chemicals 120 100 80 60 40 Natural gas/grid gas Oil Coal/Peat 20 0 2012 2020 2050 Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Medium New 2050 BAU 32

Fuel use - Transport (TWhth) Fuel use - Transport 70 60 50 Key insights: Electrification of transport leads to significant gains in efficiency Domestic biofuel production offers huge business potential Biofuels 40 Electricity 30 Hydrogen Natural gas 20 Petrol 10 Diesel Jet fuel 0 2012 2020 2050 Basic 100% RE 2050 Basic Low 2050 Basic Medium 2050 Basic New 100% RE Low Medium New 2050 BAU 33

Gas storage Annual gas balance for the Basic 100% scenario Y-axis values in MWh Each scenario has a unique storage profile 34

Main cost assumptions Cost assumptions Cost category Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Wind - onshore Capex /kwe 1100 1000 900 Lifetime Years 20 25 30 Opex fixed % of capex 4.26 % 4.37 % 4.51 % Wind - offshore Capex /kwe 2500 2100 1800 Lifetime Years 20 25 30 Opex fixed % of capex 4.23 % 4.37 % 4.55 % Solar PV - ground-mounted Capex /kwe 900 550 300 Lifetime Years 30 35 40 Opex fixed % of capex 2.00 % 2.00 % 2.00 % Solar PV rooftop Capex /kwe 1200 700 400 Lifetime Years 30 35 40 Opex fixed % of capex 1.00 % 1.00 % 1.00 % Hydropower - Run of the river Capex /kwe 2750 2860 3060 Lifetime Years 50 50 50 Opex fixed % of capex 4.00 % 4.00 % 4.00 % Economic calculations based on 7% Weighted Average Cost of Capital (WACC) 35

Main cost assumptions Cost assumptions Cost category Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Renewable Energy gasification plant Capex /kwth 420 420 300 Lifetime Years 25 25 25 Opex fixed % of capex 5.30 % 5.30 % 4.00 % Biodiesel plant Capex /kwth 3420 3080 2770 Lifetime Years 20 25 30 Opex fixed % of capex 3.00 % 3.00 % 3.00 % Biopetrol plant Capex /kwth 790 710 640 Lifetime Years 20 25 30 Opex fixed % of capex 7.70 % 7.70 % 7.70 % CO₂ Hydrogenation plant (P2G) Capex /kwth 1750 970 870 Lifetime Years 30 30 30 Opex fixed % of capex 4.00 % 3.30 % 3.30 % Biogas plant Capex /kwth input 240 216 194 Lifetime Years 20 25 30 Opex fixed % of capex 7.00 % 7.00 % 7.00 % Biogas upgrading Capex /kwth 300 270 240 Lifetime Years 15 20 25 Opex fixed % of capex 15.80 % 15.80 % 15.80 % Gasification gas upgrading Capex /kwth 300 270 240 Lifetime Years 15 20 25 Opex fixed % of capex 15.80 % 15.80 % 15.80 % 36

Main cost assumptions Cost assumptions Cost category Unit Thermal Plants Finland 2020 Finland 2030 Finland 2050 Value Value Value Heat pump for DH and CHP Capex /kw_e 3430 2970 2220 Lifetime Years 20 20 20 Opex fixed % of capex 2.00 % 2.00 % 2.00 % Average CHP plant Capex /kw_e 1000 1000 1000 Lifetime Years 25 25 25 Opex fixed % of capex 3.7 % 3.7 % 3.7 % DH/CHP boiler Capex /kwth 100 100 100 Lifetime Years 35 35 35 Opex fixed % of capex 3.70 % 3.70 % 3.70 % Condensing plant (average) Capex /kw_e 1000 1000 1000 Lifetime Years 30 30 30 Opex fixed % of capex 3.00 % 2.00 % 2.00 % Waste CHP plant Capex /kwth input 216 216 216 Lifetime Years 20 20 20 Opex fixed % of capex 7.40 % 7.40 % 7.40 % Capex /kw_e 5500 6000 6500 Lifetime Years 40 40 40 Opex fixed % of capex 3.50 % 3.50 % 3.50 % 37

Main cost assumptions Cost assumptions Cost category Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Storage systems Heat storage DH Capex /kwth 3 3 3 Lifetime Years 20 25 30 Opex fixed % of capex 0.70 % 0.70 % 0.70 % Grid gas storage Capex /kwth 0.05 0.05 0.05 Lifetime Years 50 50 50 Opex fixed % of capex 2.00 % 2.00 % 2.00 % Lithium ion stationary Capex /kwh_e 300 150 75 Lifetime Years 10 15 20 Opex fixed % of capex 3.30 % 3.30 % 3.30 % Lithium ion BEV Capex /kwh_e 200 150 100 Lifetime Years 8 10 12 Opex fixed % of capex 5.00 % 5.00 % 5.00 % 38

Main cost assumptions Cost assumptions Cost category Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Infrastructure District heating grid Capex /MWhth 72 72 72 Lifetime Years 40 40 40 Opex fixed % of capex 1.25 % 1.25 % 1.25 % District heating substation - Residential Capex /connection 6200 5600 5000 Lifetime Years 20 20 20 Opex fixed % of capex 2.42 % 2.68 % 3.00 % District heating substation- Commercial Capex /connection 21500 21500 21500 Lifetime Years 20 20 20 Opex fixed % of capex 0.70 % 0.70 % 0.70 % District cooling network Capex /MWth 600000 600000 600000 Lifetime Years 25 25 25 Opex fixed % of capex 2.00 % 2.00 % 2.00 % Key comment: The importance of transparency of all assumptions is critical Disagreement over assumptions can provide the basis of progressive discussion This must be the new standard in Finland Too many reports and documents lack this transparency 39

Further cost assumptions Cost assumptions Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Fuel Coal/Peat /MWh 11.16 11.52 12.24 Oil /MWh 42.84 47.88 57.96 Oil USD/bbl 107.40 118.90 142.00 Diesel /MWh 54.00 59.76 70.56 Petrol /MWh 54.72 60.12 70.92 Jet fuel /MWh 57.96 63.36 74.16 NG /MWh 32.76 36.72 43.92 Liquid biofuels /MWh 84.78 73.48 65.02 (weighted average) /MWh 18.00 19.80 21.60 Straw /MWh 14.04 15.48 18.36 Wood chips /MWh 18.36 21.60 27.36 Wood pellets /MWh 36.72 39.24 43.92 Energy crops /MWh 16.92 18.72 22.68 Uranium (including handling) /MWh 5.40 6.48 7.56 40

Further cost assumptions Cost assumptions Unit Finland 2020 Finland 2030 Finland 2050 Value Value Value Fuel handling (storage, distribution and refining) Fuel oil to central CHP and PPs /MWh 0.943 0.943 0.943 Fuel oil to industry and DH /MWh 6.858 6.858 6.858 Diesel for transportation /MWh 9.767 9.767 9.767 Petrol / Jet fuel for transportation /MWh 7.502 7.502 7.502 NG to central CHP and PPs /MWh 1.483 1.483 1.483 NG to industry and DH /MWh 7.380 7.380 7.380 NG for transportation /MWh 11.326 11.326 11.326 to conversion plants /MWh 5.688 5.688 5.688 to central CHP and PPs /MWh 5.688 5.688 5.688 to industry and DH /MWh 4.270 4.270 4.270 to individual households /MWh 10.746 10.746 10.746 for transportation (biogas) /MWh 4.270 4.270 4.270 41

Further cost assumptions Carbon content in the fuels Coal / Peat kg CO₂ eq /MWh 363.60 363.60-381.24* 381.24 Oil kg CO₂ eq /MWh 283.68 283.68 283.68 NG kg CO₂ eq /MWh 198.14 198.14 198.14 Waste (related to inorganic portion) kg CO₂ eq /MWh 114.48 114.48 114.48 Solid biomass kg CO₂ eq /MWh 396.00 396.00 396.00 * Emission factor will depend on share of each fuel. 42